The United States Securities and Exchange Commission (SEC) has made a significant policy reversal by reversing its controversial decision. Staff Accounting Bulletin (SAB) 121marking a crucial change in the regulatory landscape for cryptocurrencies under new leadership. The move follows the departure of former SEC Chairman Gary Gensler and ushers in a potentially more dovish stance toward crypto under Commissioner Hester Pierce, who took the helm of the new group of SEC crypto work.
SAB 121, which was introduced in March 2022, had imposed strict requirements on banks and other public companies to account for crypto assets held for customers as liabilities on their balance sheets. This has been widely criticized by the crypto community for deterring financial institutions from engaging in digital currencies due to increased complexity and accounting costs.
The new bulletin, SAB 122, officially supersedes the SAB 121 guidance. It changes the approach, allowing companies to use broader accounting standards such as U.S. GAAP for contingencies and International Reporting Standards (IFRS) to manage crypto custody obligations. This change is seen as a relief for financial institutions, potentially opening more opportunities for banks to integrate crypto services without the previous strict conditions.
Hester Pierce, often nicknamed “Crypto Mom” for her advocacy for clearer and more constructive crypto regulations, celebrated the decision on social media, signaling her long-standing criticism of SAB 121. Pierce has repeatedly argued that Guidelines were not aligned with the SEC’s broader mission, particularly due to the lack of overall regulatory clarity for cryptocurrencies.
Goodbye, goodbye SAB 121! It hasn’t been fun 😐 Staff Accounting Bulletin No. 122
-Hester Peirce (@HesterPeirce) January 23, 2025
This policy shift comes after a bipartisan congressional effort in 2024 to repeal SAB 121 was vetoed by then-President Joe Biden, underscoring the previous administration’s cautious approach to regulating cryptocurrencies. However, with the inauguration of Donald Trump on January 20, following a campaign highlighting pro-crypto policies, the regulatory environment has seen a dramatic change. The Trump administration has already begun engaging in crypto through an executive order aimed at promoting U.S. leadership in digital assets, including the creation of a task force to explore crypto regulation and a national crypto stock, while explicitly opposing the creation of a central bank digital currency (CBDC).
Senator Cynthia Lummis strongly supported the regulatory change, calling SAB 121 a disaster for the banking industry that has stifled American innovation and slowed the progress of digital assets. She expressed enthusiasm for its repeal and stressed the importance of refocusing the SEC on its core mission. His endorsement of the SEC’s new guidance underscores a broader sentiment among some U.S. lawmakers in favor of a regulatory framework that promotes rather than restricts the growth of blockchain technology and cryptocurrencies.
This development highlights a new era of crypto regulation in the United States, in which the SEC, led by figures like Pierce and Acting Chairman Mark Uyeda, could foster a more nuanced and possibly more favorable environment for digital assets. This could encourage more traditional financial institutions to explore and integrate crypto services, potentially catalyzing significant growth in the sector.
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